LS Legal News Bulletin
What does the Budget 2018 mean to you?
Wednesday 19th December 2018
Income Tax Changes
The new Budget is rather positive news for taxpayers. It is decided that the higher-rate income tax threshold, above which your income is taxed at 40%, will rise from £46,350 to £50,000 in April. The personal allowance or the amount you can earn before paying any income tax, will rise from £11,850 to £12,500.
However, if you earn more than £100,000, your personal allowance goes down by £1 for every £2 that your adjusted net income is above £100,000. If your income is £123,700 or above, your allowance is zero. However, from April 2019, your allowance will be zero if your income is £125,000 or above.
Different income tax bands may apply to your income if you live in Scotland.
Moreover, the changes to tax rules affecting self-employed contractors will be extended to large and medium-sized firms from 2020. Companies will have to determine whether contractors are treated as employees for tax purposes. This means that they could be liable for income tax and national insurance.
Buy-to-Let Watchouts
Changes to capital gains taxes could impact landlords, particularly those letting their former homes.
Letting relief reforms have been outlined, which only applies to those property owners who share occupancy with the tenant, will be introduced in 2020. Currently, capital gains tax on the sale of a property, which has been used as a landlord's main home in the past, but which has since been let out, can be reduced by lettings relief.
Moreover, the capital gains tax exemption on the final period, that a landlord owns a former home before selling it, will be reduced from 18 months to 9 months. There will be no changes to the 36-month final period exemption available to disabled people or those in a care home.
There have been several tax relief changes for landlords. Until April 2017, landlords could deduct mortgage interest from their rental income to calculate their taxable profits. Changes introduced since then mean that from 6 April 2020, tax relief on mortgage payments will be restricted to the basic rate of income tax (20%).
Furthermore, consultation will take place in January 2019 on a stamp duty surcharge of 1% for non-residents buying residential property in England and Northern Ireland.
First-Time Buyer Support
Several changes have been announced by the Chancellor to help first-time property buyers.
The government's Help to Buy scheme will be extended for another two years until 2023. It will only be available to first-time buyers and for houses up to new regional property price caps (including a maximum of £600 000 in London). A further Help to Buy Equity Loan scheme after March 2023 will not be introduced.
Moreover, first-time buyers' stamp duty relief to shared ownership properties worth up to £500 000 in England and Northern Ireland has been extended. It is welcome news for those who bought eligible properties since the last Budget in November 2017, as the relief will be backdated so that recent buyers can claim a refund.
This is an extension of the 2017 Autumn Budget statement that first-time buyers would pay no tax on properties up to £300 000, and those buying homes between £300 000 and £500 000 would get a partial discount. Note that this system is different in Scotland.
Transport Tax Changes
Fuel duty will be frozen for the ninth consecutive year, which will save the average driver a cumulative £1,000 - and the average van driver £2,500 - by April 2020. Furthermore, a £28.8bn investment package for England's strategic roads is to be used for projects such as motorway improvements.
Air Passenger Duty rates for short-haul flights will remain at the same level in 2020-2021, as they have been since 2012. However, the rates for long-haul flights will increase in line with the Retail Price Index (RPI), which means a £2 increase for economy and a £4 increase for premium economy, business and first class. Those travelling long haul by private jet will see the rate increase by £13. Duty is charged on each passenger at the rate for their final destination.
News for Young People
By the end of 2018 the new 26-30 Railcard will be rolled out to the entire country. Last year's Autumn Budget brought about a trial of the 'millennial' railcard. However, the introduction of the card across the UK will mean up to 4.4m young people will be eligible for the one-third discount (subject to a minimum £12 fare in the morning peak) in England, Scotland and Wales.
A one-off £400m 'bonus' for schools to spend on equipment and facilities this year, as well as £5m to support new University Enterprise Zones has also been announced. This aims to promote collaboration between universities and businesses, support start-ups and scale-ups, and disseminate management skills.
